Are Trade Associations Worth the Investment?

What you really get from belonging to an industry association and tips for spotting a good one.

Columns: 2/1/2007

Mitch Free

There are many trade associations serving our industry, some are great and offer real value while others have outlived their usefulness. A membership to an industry trade association averages several thousand dollars per year. Just as you would evaluate any investment for your business it is important to determine your anticipated return on investment (ROI) and decide whether or not the capital you would invest in a trade association membership will give you a better ROI than other ways you could use the capital.

Essentially, you have to really think about what you hope to gain by belonging to a trade association and figure what that value is worth to you. There is no hard and fast rule for picking a trade association, because it will vary for every business depending on your individual needs and objectives.

I quickly scanned the Web sites of a number of trade associations and read over their member benefits sections. It appears to me that the majority of them are promoting their value as getting discounts for you on products and services. They don’t seem to be going into much detail about how they help you and your business grow and prosper. Some do promote events such as “purchasing fairs” where you can go and meet potential buyers of your services. But they charge you a significant fee over and above your membership for the event. So what does the membership fee cover?

Most all industry trade associations claim to offer access to a group rate on health insurance. This could be valuable. You would need to compare the rate from the association versus one you could obtain on your own from an independent insurance broker. If this is one of the reasons you are joining a trade association, be sure and ask for the rates in writing before you pay your membership fee to make sure you really are getting a discount.

Many of the associations also have made deals with numerous companies that offer discounts on products and services to their members. If you plan to use those services this could prove valuable and help in your return on investment justification.

If you do choose to buy a product or service recommended by an association it is important to know whether or not the association is making a commission or other compensation from the services they are recommending to their members. You want to know if they are recommending the product or service because they have investigated it and know it is good or if they are just trying to get you buy something so they can make more money from you.

I have been approached by a number of associations asking me to give a discount on a membership to MFG.com to their members. While I am against discounting in principle, I did consider it, but when they asked me for a commission each time they caused a member to purchase a subscription that just didn’t seem right to me.

Instead of passing along all the savings to their members, they wanted to keep part of it themselves and not disclose that fact to their members. I decided that I did not want to be involved with an association that would do that to their members.

When doing your due diligence on a trade association, before buying the membership you might want to ask if their membership is on the rise or declining. If it is declining, that might be a signal that those who purchased before you did not get the value they had expected.

And most importantly, ask for a copy of their financial statements so you can see where the membership fees are being spent. Are they being spent on projects and causes you think are worthwhile or are they going for salaries and marketing to recruit more members?